CIT Remands 'Problematic' Constructed Value Reallocation Practice in Welded Line Pipe AD Case

The Commerce Department will reconsider its decision to reallocate the cost of production for antidumping administrative review respondent Nexteel Co.'s non-prime products to account for their losses when calculating constructed value, the Court of International Trade said in a June 7 ruling made public on June 15. Issuing her second remand in the case brought from steel producers Husteel Co. and Nexteel over the 2016-17 AD administrative review of welded line pipe from Korea, Judge Claire Kelly sustained all other determinations made by Commerce.

In the review, Commerce had calculated the costs of non-prime welded line pipe goods based on their resale value and then reallocated the difference between resale value and actual costs of production for non-prime products to the costs of prime products. In essence, Commerce shifted non-prime costs to prime products when coming up with its constructed value.

Kelly found this practice "problematic," declaring that it violates the standards set in the U.S. Court of Appeals for the Federal Circuit case,Dillinger France S.A. v. United States . Dillinger says that Commerce must calculate constructed value based on the actual costs of production for prime and non-prime products. "Since Commerce’s methodology involves using likely sales value for non-prime products instead of actual costs as reported by Nexteel, Dillinger calls into question whether or not Commerce’s treatment of Nexteel's non-prime welded line pipe products complies with the statute," Kelly said. "Commerce’s explanation of its practice is inadequate in light of Court of Appeals’ precedent."

Also in the decision, Kelly sustained Commerce's reversals on a few aspects of the case. In response to the judge's first remand, Commerce no longer found a particular market situation existed in Korea for makers of a key welded line pipe input and accepted respondent SeAH Steel Corp.'s third country sales into Canada to calculate normal value.

Kelly also sustained based on further explanation Commerce's decision to reclassify Nexteel's production losses on suspended product lines into its general and administrative expenses after Commerce successfully argued that adjustments are justified "where a company's normal books and records don't reasonably reflect production costs." Kelly said the court cannot determine that it is unreasonable for the agency "to determine that a company’s attribution of costs relating to the extended suspension of certain non-subject product lines as costs of goods sold results in an inaccurate reflection of the general expenses incurred in the production of subject merchandise."

(Husteel Co., Ltd. v. United States, Slip Op. 21-70 CIT #19-00112, dated 06/07/21, Judge Kelly; Attorneys: Donald Cameron of Morris Manning for plaintiff Husteel Co., Ltd.; Jaehong Park of Arnold & Porter for consolidated plaintiff Nexteel Co. Ltd.; Joshua Kurland of DOJ for defendant U.S. government)